Return to the mean…that’s where we are.

I came across a Reddit post recently which superimposed the famous “bubble chart” on top of the recent Bitcoin bubble chart. The similarities are uncanny.

I don’t have the same image available, but I’ve uploaded them both below and thrown in a quick hand-drawn trend line on the bitcoin chart:

So what does this tell us? Sometimes, there are new things under the sun, but not in this case.

We clearly, and beautifully, went through every single stage of the bubble, even including the “first selloff” there around September 2017. We now return to the original trendline, and depending on how you draw it we are either slightly below or right at it.

Things feel very quiet right now, but it’s very easy to forget that over the last month we have gone from a low of 5900 to 11,500.

Bitcoin has finally solved the scaling problem for a while

As of this writing, that you can send Bitcoin to anyone you want for a few cents. It turns out that the recent improvements to the protocol, including Segregated Witness are starting to reach full force, with Coinbase and other exchanges announcing support. We are quickly on our way to almost doubling the capacity and each block.

In addition to that, the Bitcoin lightning network was released in alpha and it appears there’s so much demand that people have taken the alpha version and modified it to work on the main network. There are several thousand lightning nodes on a barely functional release of software.

It will still be probably six months until we see a stable release of the lightning network, but we will start seeing the repercussions ripple (pun intended) through cryptocurrency. I still think the first casualties will be coins which were meant to take the place of Bitcoin’s payment functionality: Bitcoin cash, Litecoin, Ripple, are at the top of the list.

I’m still waiting for someone to tell me why exactly we need Bitcoin cash when we can just send Bitcoin for less money.

Alts are bleeding again

Just like when I wrote back in the fall that the perfect time to buy is when there is blood in the streets, I remember pointing out how EOS touched 50 cents. SALT was at $2.25, Civic was at $.29. Nobody wanted to buy tokens or alt coins because nobody wanted to buy tokens or alt coins.

That turned out to be the perfect time to buy quality coins, and now feels the same. Unfortunately, I’m fully committed so I don’t have any money on the sidelines to buy in.

The shakeout of weak coins begins

Beware ye who hold shitcoins. I’m looking at you people who hold Ripple, and Tron, and the unfortunate souls in the new BITCONNEEEEEEEEECT scam.

The shakeout is just getting started.

As we are approaching the time when a lot of coins are going to launch actual products, we will see who’s not wearing a bathing suit when the tide goes out.

One step above shitcoins are the coins who have no actual reason for existing, now that Bitcoin has solved the scaling problem for the near future.

The shakeout in ICOs begins

The SEC has reportedly sent over 80 subpoenas for communications surrounding various ICOs. They have been warning about this for a while, but this seems to be the beginning of some additional enforcement actions.

Again, if you stuck to high quality coins with solid teams and good reputations, then you probably won’t get stung by any enforcement actions. I still don’t think we will see anything retroactive…because exactly how would that work without causing your average investor to lose a large amount of money?

Ethereum will still be talking about moving to proof of stake, and still consistently not doing it. I’m starting to think that Ethereum will just become a very stable and expensive platform for simple but mission-critical smart contracts, with most distributed applications moving to platforms like EOS.

We are just at the beginning of the next wave. Don’t mistake the calm for an indication that things aren’t happening just under the surface.